Country output and financial black holes: public–private partnerships and the Laffer curve, fiscal corruption risk, and bailout rate of non-performing loans

Saisomphorn Larhsoukanh and Chengzhang Wang

Economic Research-Ekonomska Istraživanja, 2020, vol. 33, issue 1, 540-554

Abstract: This study develops the link between output and fiscal corruption risk in public–private partnership (PPP) schemes and the government bailout rate of non-performing loans (NPLs). The model assumes that corruption is widespread in such public investment programs. The objective functions of the government and PPP firms include fiscal corruption risk, given that the PPP firm and tax inspector can ‘effectively’ negotiate bribes. The model solves for the optimal country output (i.e., aggregate productivity) according to the Lagrange method. Long-term prospects are introduced to solve the problem with commercial banks, as most PPPs borrow from commercial banks. The results reaffirm that tax policy can exacerbate the country’s output loss. Although the equilibria between aggregate productivity and the Laffer curve lack a direct link to fiscal corruption risk, their magnitude does and depends on the number of PPPs. The PPP transfer from the government in period 2 and the number of PPPs rather than government expenditure in period 1 and the Laffer curve (tax revenues) mainly determines the bailout rate of PPPs’ NPLs. The article concludes with suggestions to prevent tax evasion and fiscal corruption risk in PPP schemes by using a cluster of cooperation, and recommends further research into cultural aspects.

Date: 2020
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/1331677X.2020.1718523 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:reroxx:v:33:y:2020:i:1:p:540-554

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/rero20

DOI: 10.1080/1331677X.2020.1718523

Access Statistics for this article

Economic Research-Ekonomska Istraživanja is currently edited by Marinko Skare

More articles in Economic Research-Ekonomska Istraživanja from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().